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DCR Assigns a 'AAA' CPA Rating to USAA

12 January 2000

DCR Assigns a 'AAA' CPA Rating to USAA

    CHICAGO, Jan. 11 -- Duff & Phelps Credit Rating Co. (DCR)
assigned claims paying ability ratings of 'AAA' (Triple-A) to the United
Services Automobile Association (USAA).  USAA offers primarily automobile,
homeowners' and renters' insurance to members of the U.S. military community
and their families.  The Rating Outlook is Stable.
    The ratings reflect USAA's high capital levels, low operating leverage and
conservative reserving philosophy. DCR believes USAA possesses a competitive
advantage provided by its low cost structure. Further, USAA enjoys an
extremely loyal customer base developed over its long history of service to
the military community.
    At the same time, the ratings consider the negative effect of intense
price competition in auto insurance rates on profits. Additionally, USAA's
operations result in a concentration of homeowners policies in states that
expose it to catastrophe risk.  USAA monitors this risk closely and mitigates
it with a sophisticated catastrophe management and reinsurance strategy.
    During its 77-year history, USAA has enhanced its growth and financial
strength by broadening its base of membership and services.  USAA's membership
consists of two distinct market segments referred to as members and associate
members.  Regular member eligibility is primarily offered to military
personnel -- both officers and enlisted.  The associate members are primarily
composed of immediate and extended families of members.  In 1995, the board of
Directors approved entry into the enlisted market.  The most recent
eligibility change came in 1997 when USAA afforded membership status in USAA
to noncommissioned officers.  DCR believes that USAA may be challenged if the
risk profile of this new group differs in unexpected ways from USAA's
traditional membership.
    USAA also offers its customers a full line of financial services through
various subsidiaries.  The subsidiaries include a life insurance company that
sells annuities, life insurance and health insurance; a federal savings bank
that offers checking and savings accounts, loans, certificates of deposit,
individual retirement accounts and credit cards; an investment company that
offers mutual funds, owns a registered broker-dealer and a mutual fund
transfer agent; and a real estate company.
    USAA reported statutory assets for its combined property/casualty
insurance operations of $11.1 billion and surplus of $6.0 billion as of
December 31, 1998.  Net written premium from its property/casualty insurance
operations was $4.9 billion in 1998.
    DCR is a leading global rating agency with 34 local market offices
providing ratings and research on debt issues and insurance claims paying
ability in more than 50 countries.  DCR provides more than 600 claims paying
ability and debt ratings on life & health, property & casualty, title, bond
and mortgage insurers in 13 countries.

    For additional information, visit DCR's Web site at http://www.dcrco.com
(Quick Search: USAA).  DCR's research is also available on Bloomberg at
DCR and FirstCall's BondCall Direct/Research Direct at
http://www.firstcall.com, as well as through other third-party providers.

    NOTE: USAA has declined to enter into a formal ratings relationship with
DCR.  The above ratings are not supported by a contractual agreement that
requires USAA to keep DCR fully informed of all future developments that could
affect the rating.  The rating is provided by DCR as a service to those
organizations and institutions that use and publish DCR ratings.